Retirement at 60 – Financing Is Capital

The means exist to finance retirement for everybody at age 60. The Front de Gauche is advancing proposals.

The French government is happy at the reduced cost of a partial return to retirement at age 60. The measure will cost 1.1 billion euros in 2013 and 3 billion euros in 2017. This is less than the 5 billion euros initially foreseen.

To finance the measure, an additional deduction for old age insurance of 0.1% will be paid equally by wage-earners and employers. After five years, it will be 0.25%.

The financing requirement is like the reform – it is limited. The strikes and demonstrations around the retirement issue in 2010 demanded a return to the right for all to retire at age 60, on full retirement. Now that would create big new financing needs of around 50 billion euros in 2020, and 160 billion euros in 2050 (1).

With that perspective, the Front de Gauche, in its election manifesto or political platform “l’Humain d’abord” proposes to eliminate the exemptions on contributions of the bosses, which represents 33 billion euros, including 10 billion euros for retirement. In addition to eliminating this tax loophole, the employers’ contributions would be modulated on the basis of the company’s employment and wage policy. This could bring in several billion euros to the retirement funds.

Another pile of gold to be mined is the diverse remunerations such as employee share-purchase plans, stock options, and obligatory and optional profit-sharing plans, all of which are totally exempted from social security contributions. Stock options alone result in a 3-billion-euro shortfall for social security, according to the latest estimates available.

By broadening the base for social security contributions to include these forms of income, the government could obtain 5 billion euros, and then 10 billion euros a year. A tax on company financial products could also bring in 20 billion euros.

But the key remains the level of employment and of wages. Were France to create 150,000 jobs a year (1) – a little less than the rate that obtained until the late 1990s, it would bring in …. 80 billion euros a year!

(1) Petit Livre des retraites à l’usage de ceux qui veulent la défendre, de Pierre-Yves Chanu et Jean-Christophe Le Duigou, avril 2010. [The Little Book on Retirement, For the Use of Those Who Want to Defend It, by Pierre-Yves Chanu and Jean-Christophe Le Duigou, April 2010, published by Editions de l’Atelier]